No Peeking: Can Insurers in the Northwestern and Mountain States Rely on Extrinsic Evidence to Determine if They Have a Duty to Defend

Readers of the Insurance Commando Blog know we criticize Washington’s Supreme Court for proscribing insurers from looking outside the complaint to determine if they must defend. To provide some perspective, and useful information, this week we’ll summarize the extrinsic evidence rule in Washington and its neighbors. The table below encapsulates each state’s version of the rule:

State

Can An Insurer Rely on Extrinsic Evidence?

Alaska

No.

Idaho

Unclear.

Montana

Yes.

Oregon

Only under narrow exceptions.

Utah

Used to depend on what the policy said. Now seems to forbid reliance on extrinsic evidence. See below for details.

Washington

Don’t even think about it.

Below we’ll flesh out the above – and provide a few cites:

Alaska

Alaska appears not to have considered the extrinsic evidence rule much. Its Supreme Court has simply forbidden insurers from considering evidence outside the complaint in denying the duty to defend. State Dept. of Transportation v. State Farm.

Rejecting the majority rule, the Montana Supreme Court allows an insurer to deny the duty to defend even if the complaint alleges covered facts, but the insurer knows of facts negating its duty to defend. Landa v. Assurance Co. of America.

Utah courts – at least for a time – had the most novel formulation of the rule. In 2001, the Utah Supreme Court held that policy language determines if insurers may rely on extrinsic evidence. Fire Ins. Exch. v. Estate of Therkelsen. Following the Court’s lead, the Tenth Circuit Court of Appeals held evidence outside what the complaint alleges is irrelevant if the policy defined “suit” as what is alleged. Employers Mut. Cas. Co. v. Bartile Roofs, Inc. The Utah Supreme Court, perhaps trying to allay head scratching, explained a bit further that if the policy has language such as “covered claim or suit,” a court may rely on extrinsic evidence. Fire Ins. Exch. v. Estate of Therkelsen. Not sure this clears up anything. Insurers need to know if they can look outside the complaint to determine if what is “alleged” is actually “covered.” It doesn’t seem – to this blogger anyway – that “covered” or “alleged” policy language provides much direction to the insurer. In a 2013 case, the Utah Supreme Court seemed to revert to a more conventional reliance on the “8 corners rule.” Basic Research, LLC v. Admiral Ins. Co. Good thing Utah is a small state.

Washington

As we’ve told you before, Washington refuses to allow an insurer to rely on any evidence outside the complaint in determining its duty to defend. Expedia, Inc. v. Steadfast Ins. Co.

Conclusion

Not surprisingly, each state puts its own stamp on the extrinsic evidence rule. Further, these states illustrate extreme interpretations of the rule (Montana’s apparent rejection and Washington’s refusal to recognize exceptions), plus positions in between (Oregon by recognizing narrow exceptions). And then there’s Utah.